"ACCOUNTANCY10The early adoption by the various companies is permitted during this period. In case, anentity adopts the amendments in the interim periods, then the stated adjustments must reflectin the beginning of the fiscal year which includes the interim period. In case, an entitydecides to adopt this standard early, then it will have to adopt all of the amendments duringthe same accounting period.The Current Generally Accepted Principles of Accounting does not provide some specificguidance on the cash flow issues that have been included in this update. These amendmentswould lead to an improvement in GAAP since they would help in providing guidance on eachone of these 8 issues which reduces the current and the potential future diversity in thepractice.Major changes:The new guidance note would address the classification of the various cash flows related withthe following transactions:? In respect of the prepayment of the debt or the costs of extinguishment, the entityshall classify the debt or the costs of extinguishment as the cash outflows from thefinancing activities.? Settlement of the 0 coupon instruments of debt or other such instruments of debt withthe interest rates which are not material in relation with the effective rate of interest ofthe borrowing. In this case, the entity would be reporting the portion of the paymentthat it has paid towards the 0 coupon bond with the cash amount being apportioned tothe interest related with the discount on the debt as the outflow of cash from theoperating activities. That would help in the classification of the payment of cashwould be apportioned towards the principal amount of the outflow of cash from thefinancing activities. ACCOUNTANCY11? There are many of the payments that are contingent in nature but the payments inrespect of which have to be made after the combination of business. In such of thecase, the entity will be reporting the payment of cash after the payment of the samethat has not been made after the period of 3 months or less from the date ofconsummation of the business combination for the purposes of settling in thecontingent consideration liability as the outflow of cash from the financing and theoperating activities. The portion of the payment of cash up to the date of theacquisition would be at the fair value of the contingent consideration liability. Thiswould include the measurement of the period adjustments and would be reportedas anoutflow from the financing activity. The amounts that have been paid in excess as onthe date of the acquisition, the fair value of that liability would be classified as beingan outflow from the operating activity. Any of the cash payments that have been madeafter the consummation of the business combination would be reported as an outflowfrom the investing activity.? In case, there are proceeds from the settlement received from the insurance company,then in that case, the entity shall will report the proceeds received from the insurancesettlement as being related with the insurance coverage which is the nature of the loss.The entity shall further apportion the settlement of the lump sum which is related withmore than just one type of loss like the loss of a building in the fire and the cost of thebusiness interruptions to each of the types of the losses for the purposes ofdetermination of the way and the manner in which the proceeds would be reported.? In case, an entity has the proceeds from the settlement of the corporate owned lifeinsurance, then the entity would report proceeds from the corporate owned lifeinsurance as an outflow from the investing activity and that would be able to represent ACCOUNTANCY12the outflow of cash from the investing activities, an outflow from the operatingactivity or the combination of both of these.? In respect of the distributions that have been received from the equity investors. Thenin such a case, the entity would either adopt the method of earnings approach or theapproach of the nature of the distribution that would determine the amounts of thedistribution that have been received from the equity method as the returns on theinvestment which would be reported as an inflow from the operating activity to thereturns form the investment would be reported as the inflow from the investingactivity.? If the approach of the cumulative earnings is being applied, then the distributionswould be the amount of the cumulative equity in the amounts of the earnings wouldbe reported as the returns from an investment and that which are in excess of thatamount would be reported as being the returns from that investment.? If the approach of the nature of the distribution is being followed, then the amountshall be reported on the basis on the nature of the activity or the various activities thathave generated them.The entity that opts for this approach would be in possession ofsome basic knowledge only that is to be applied to the method of the individual equitysince the approach of the cumulative earnings would be a change in accounting andthat would be based upon the nature of the distribution for all the other investeesfollowing the equity method.? In respect of the beneficial interest in the securitization transactions. An entity in sucha case would report the beneficial interests that have been obtained in the financialassets and the same would be transferred to the entity of the unconsolidatedsecuritization as being the non-cash activity from the investing activity. The entity "